What if you could sell shares to anyone — not just wealthy accredited investors — without spending millions on a traditional IPO? That is exactly what Regulation A+ offers. Since 2015, small companies have used this "mini-IPO" exemption to raise money from the general public with lighter disclosure than a full registration. But the exemption comes in two tiers, and picking the wrong one can cost you months of state-by-state review or saddle you with reporting obligations you did not need. Here is how Tier 1 and Tier 2 actually differ, and how to choose.
What Regulation A+ Is
Regulation A+ comes from Title IV of the 2012 JOBS Act, with final SEC rules taking effect in June 2015. It modernized the old Regulation A exemption — which capped raises at $5 million and had fallen into disuse — into a two-tier framework that lets private companies offer securities to the public.
The key word is public. Unlike a Regulation D private placement, which generally limits you to accredited investors, a Regulation A+ offering can be marketed broadly and sold to non-accredited investors. Unlike a full IPO, you file an offering statement on Form 1-A and wait for the SEC to qualify it, rather than registering the offering outright. Qualification involves SEC staff review and comments, but the disclosure burden is lighter than a Form S-1 registration.
The exemption has grown into real money. In May 2025, the SEC's Division of Economic and Risk Analysis published A Decade of Regulation A, reporting that more than $10 billion was raised across Regulation A and Regulation Crowdfunding offerings during the periods reviewed. For small issuers that need public capital without Wall Street underwriting, the path is now well traveled.
Tier 1 vs Tier 2 at a Glance
| Feature | Tier 1 | Tier 2 |
|---|---|---|
| Maximum raise (12 months) | $20 million | $75 million |
| Financial statements | Need not be audited | Must be audited by an independent accountant |
| Ongoing reporting | Exit report only (Form 1-Z) | Annual (1-K), semiannual (1-SA), and current (1-U) reports |
| State blue-sky review | Full state registration and qualification | Preempted — states cannot require registration |
| Investment limits | None | Non-accredited investors capped at 10% of the greater of income or net worth |
| Selling securityholder cap | $6 million | $15 million |
If you are raising $20 million or less, you may elect either tier. That choice is the heart of this guide, because the tiers trade off against each other in ways the table only hints at.
Tier 1: The Smaller Raise With the Bigger State Hurdle
Tier 1 allows raises of up to $20 million in any 12-month period. Its headline advantages are that financial statements do not need to be audited and there are no ongoing reporting obligations beyond a short exit report on Form 1-Z when the offering ends. There are also no caps on how much any individual investor may buy.
The catch is state securities law. Tier 1 offerings remain subject to full state registration and qualification — the "blue sky" review of every state where you offer or sell securities. Each state can examine your offering documents, and achieving acceptance state by state is slow and expensive.
There is a pressure valve: the North American Securities Administrators Association (NASAA) runs a coordinated review program in which a single lead state examiner consolidates comments from participating states. The SEC explicitly encouraged Tier 1 issuers to use it. But coordinated review is still review — it adds a second front of comments alongside the SEC's own — and Tier 1 offerings remain rare in practice. Most issuers raising under $20 million conclude that Tier 2's audit and reporting costs are cheaper than fifty-state qualification.
Tier 1 does have one genuine niche: offerings concentrated in a single state or a handful of states, where state review is a bounded task rather than a national campaign. A local company raising from its own community may find Tier 1's lighter federal burden worth the state filings.
Tier 2: The $75 Million Mini-IPO Most Issuers Choose
Tier 2 allows raises of up to $75 million in any 12-month period — raised from the original $50 million cap by the SEC's 2020 amendments to the exempt offering framework. It is the tier behind nearly every Regulation A+ offering you have heard of, and three features explain why.
Blue-sky preemption. Securities sold in a Tier 2 offering to "qualified purchasers" — a category the SEC defined to include all Tier 2 purchasers — are "covered securities" under federal law. States cannot require registration or merit review of the offering. (States may still require a filing fee or a copy of your offering materials, and antifraud authority stays intact.) This single feature is why issuers accept Tier 2's heavier federal obligations: one regulator instead of dozens.
Audited financials. Tier 2 financial statements must be audited by an independent accountant. For a company with clean GAAP books, this is a five-figure engagement. For a company whose books are a spreadsheet and a shoebox, it is the moment the offering gets real — auditors cannot audit records that do not exist, and remediation routinely takes longer than founders expect.
Ongoing reporting. After a Tier 2 offering, you file annual reports on Form 1-K (including audited financials), semiannual reports on Form 1-SA (unaudited), and current-event reports on Form 1-U for fundamental changes such as bankruptcy, auditor changes, or control shifts. This is lighter than Exchange Act reporting for public companies, but it is a permanent compliance cadence — budget for it every year until you properly exit the reporting regime.
Investment limits. In a Tier 2 offering, investors who are not accredited are limited to purchasing no more than 10% of the greater of their annual income or net worth (measured alone or together with a spouse, excluding the primary residence). Accredited investors face no limit, and the limits fall away entirely if the securities will be listed on a national exchange upon qualification. In practice, the cap rarely blocks a deal — most community raises target check sizes far below any investor's 10% line — but it shapes your minimums and your marketing.
The Form 1-A Qualification Process
Both tiers start the same way: you file an offering statement on Form 1-A with the SEC and wait for qualification. Expect the process to work like a lighter IPO review:
- Prepare the offering statement. This includes the offering circular (your disclosure document — business description, risk factors, management, use of proceeds, financial statements), plus exhibits. Tier 2 financials must be audited; Tier 1 need not be.
- File and respond to comments. SEC staff review the filing and issue comment letters, just as in a registered offering. Most issuers go through at least one round of comments and amendments. Timelines vary, but several months from filing to qualification is typical.
- "Test the waters" before and after filing. One of Regulation A+'s most founder-friendly features is that you may solicit indications of interest — orally or in writing — before filing Form 1-A, to gauge whether anyone wants your securities. You can keep testing the waters after filing too, as long as you use required legends and stay within the rules. Few exemptions let you market-test before committing to the full filing cost.
- Qualify and sell. Once the SEC qualifies the offering statement (and, for Tier 1, once state review clears), you can close sales. Securities sold in either tier are freely tradable — they are not restricted securities — which is part of what makes the exemption attractive to investors.
Who Can Use It — and Who Cannot
Eligibility is the same for both tiers. The issuer must be a company organized in the United States or Canada. Excluded issuers include investment companies, blank-check companies, issuers of fractional undivided interests in oil, gas, or mineral rights, companies disqualified by "bad actor" provisions, and companies that failed to file required ongoing Regulation A reports in the prior two years.
Two caps worth knowing apply to insiders selling alongside the company: affiliates (officers, directors, large holders) may sell no more than $6 million in a Tier 1 offering or $15 million in a Tier 2 offering in any 12-month period. And since a 2018 amendment, even SEC-reporting companies may use Regulation A+ — it is no longer restricted to private issuers.
What It Costs
A Regulation A+ offering is cheaper than an IPO and far more expensive than a friends-and-family round. Industry estimates put the all-in cost at roughly 10% of the capital raised, covering securities counsel, the audit, marketing, and platform or broker-dealer fees. An SEC staff study found median legal costs around $40,000 to $50,000 even in the exemption's early years, and total legal-plus-audit bills of $100,000 or more are common today.
The cost structure matters for the tier decision. Below roughly $5 million, the fixed costs of counsel, audit, and qualification consume a large share of proceeds — many issuers at that size look at Regulation Crowdfunding (up to $5 million with lighter process) instead. The $5 million to $20 million band is where the Tier 1 vs Tier 2 election actually bites: Tier 1 saves the audit and ongoing reporting but adds state review, while Tier 2 front-loads federal compliance for a single-regulator path.
How to Choose Your Tier
Choose Tier 2 if you are raising nationally, raising more than fits comfortably under state-review budgets, or planning follow-on raises — the ongoing reporting you set up now serves every future offering. This is the default choice, and the market has voted overwhelmingly for it.
Consider Tier 1 if your offering is concentrated in one state or a few states, your financials are unaudited and an audit would delay you past your funding window, or you want to avoid ongoing reporting entirely and will never raise publicly again. Go in with eyes open about the NASAA coordinated review timeline.
Reconsider the exemption if the raise is small enough that fixed costs eat the proceeds, your books cannot survive an audit within your timeline, or your investor base is entirely accredited — in which case a Regulation D Rule 506(b) or 506(c) offering may get you the money in weeks rather than months, with no qualification and no ongoing reports.
Why Your Books Decide Whether This Works
Notice how often this guide returned to financial statements. Tier 2 requires an audit. Form 1-A requires GAAP financials either way. Ongoing reporting means producing reliable numbers on a semiannual cadence for years. Every Regulation A+ issuer discovers the same thing: the securities lawyers can draft around many problems, but they cannot draft around books that do not reconcile.
That makes pre-filing bookkeeping the highest-leverage preparation you can do. Close your months cleanly, reconcile every account, document related-party transactions, and adopt revenue recognition your auditor will accept — before you engage counsel. Founders who arrive with audit-ready books routinely qualify faster and pay less in professional fees than founders who treat accounting as a post-filing cleanup task.
For the ongoing reporting cadence, the same discipline compounds. A semiannual report built on closed, reconciled books is a routine exercise. One built on catch-up bookkeeping is a fire drill twice a year, every year, with your auditor billing by the hour.
Keep Your Offering-Ready Books in Plain Text
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